Solved Board Paper For CBSE Class 11 Business Studies

Disinvestment involves the sale of equity shares of Public sector enterprises to private sector and the public to raise resources and encourage wider participation of the general public in the ownership of these enterprises.

ATMs are a type of vending machines, which form an important part of retail trade.

Economic activities are activities that are concerned with production, exchange and distribution of goods and rendering of services to earn money.

Small enterprise as the investment is between 10 lakh to 2 crore.

Internal trade means buying and selling of goods and services within the national boundaries of the country.

For expanding the capacity, Speedy Ltd. will require long term sources of finance. Since it does not have reserves, it can rely on:
i. Equity shares
ii. Debentures or bank loan.

Insurance is a form of contract under which one party agrees, in return of a consideration, to pay an agreed sum of money to another party, to make good for a loss, damage or injury, as a result of some uncertain event, to something of value, in which insured has financial interest,.

True, import trade speeds up industrialisation by importing raw materials, capital goods and advanced technology.

Online transactions are subject to following transaction risks:
i. Default on order taking/giving- Where either party denies that the order was ever placed.

ii. Default on delivery- No delivery has taken place, delivery at wrong address or delivery of goods other than ordered.

iii. Default on payment - Payment not received by seller but customer claims that payment was made.

‘Business risks’ refers to the possibility of inadequate profits or even losses due to uncertainties or unexpected events.

A businessman willingly undertakes the risk involved in business activities, since he gets the reward in the form of profits for bearing such risks. Profit earning is the main motive of every business. There is uncertainty and irregularity in earning of profits.

However, higher the risk, the more is the profit. The projects which involve more risks, generates more profits as compared to less risky projects.

Hence, Rijo is willing to take risks in his business.

Public Sector enterprises play the following role in India:

i. Development of infrastructure: Infrastructure consists of services like transportation, communication, irrigation etc. It is considered as the backbone of economic growth. The private sector hesitates to invest in infrastructure due to huge capital and delayed profit. Hence, the public sector enterprises undertake the task of developing infrastructure of our country.
ii. Regional balance: The private sector hesitates to set business in backward or remote area due to lack of infrastructure. The government is responsible for locating public sector enterprises in the backward areas so that people in that area get the opportunity to work and it helps in balanced regional development of the country.

The availability of different factors of production like land, labour, capital & raw material, differ among countries. Hence, all countries cannot produce equally or cheaply all that they need.
Due to socio, economic, geographical and political reasons, there is a difference in labour costs, productivity and production cost among countries. As a result, every country finds it advantageous to:

i. Produce selected goods and services that can be produced effectively; and
ii. Procure the rest from other countries that specialise in the production of the other goods at lower costs.
This leads to need for international business.

i. Puma would be able to derive the following benefits through the launch of a range of biodegradable shoes and clothes as well as completely recyclable plastic track jackets and backpacks:
a) Increasingly influence people’s attitude positively towards its working
b) Satisfy the society as a whole which is favourable in the long term interest of the firm
c) Justify its growth & existence
d) Effectively utilise resources available to solve social problems
e) Create a better environment for the business to work in.

ii. Other business firms can protect environment in the following 2 ways:
a) Top management should make a commitment towards environment protection & percolate this to the entire organisation.
b) Clear cut policies / programmes should be framed for adopting business transactions which would protect environment.

International business is advantageous for business firms in the following ways:

i. Prospect of Higher profits- In the case of lower domestic prices, firms can earn higher profits by supplying their products in those countries where prices are high.

ii. Increased Capacity Utilisation- Firms can make use of their surplus production capacities & improve the profitability of operations by planning for overseas expansion & procuring orders from foreign firms. Large scale production leads to economies of scale resulting in lower production cost & improvement in per-unit profit margin.

iii. Prospect for Growth- When demand in the home countries has saturated, firms can opt for the foreign market where demand is good & picking up fast, especially in developing countries. Firms can considerably increase their growth prospects by expanding into overseas markets.

iv. To counter intense competition in the market- International business helps to achieve significant growth when competition in the domestic market is very intense. Highly competitive market induces many domestic firms to tap international markets for their products.

v. Improved business vision- International business for many companies is part of their business policies & strategy. Companies are going international, to grow, to become competitive, to diversify & to gain strategic benefits.

i. The type of services performed by BPOs are the services which are outsourced to them- Financial services, Advertising services, Courier services & customer support services.

ii. The values contravened are:
a) Lack of data confidentiality (It is the responsibility to protect client’s data)
b) Violation of employment agreement by misusing data
c) Adoption of unethical practice for personal gains
d) Tarnishing India’s reputation in world economy

iii. Additional measures-
a) Propagate the concept of ethical business practices among employees.
b) Train & educate its employees to instill ethical behaviour among them.
c) Institute legal/ penal action in case an employee is found misusing client data.

i. For obtaining custom clearance an importer has to follow the procedures:
a) Obtain delivery order
b) Pay dock charges & obtain port trust dues receipt.
c) Prepare a bill of entry for assessment of customs import duty
d) Pay custom duty after appraiser inspect goods and verifies the details given in bill of entry.

ii. The social values being fulfilled by the brothers are:
a) Regard to parent’s aspirations
b) Rendering social service by building a cancer hospital
c) Building infrastructure in lesser developed towns/ cities
d) Generating employment

No, Mahesh’s action is not justified, even though he took the step for avoiding any further delays in the opening of the cancer hospital.

Mahesh bribed the custom official in kind, by promising him free treatment, thus promoting unethical and dishonest behavior, which is against the principles of business.

i. Franchising is a contractual agreement in which one firm (franchiser grants access to patents, copyrights, trademarks or technology to another firm in a foreign country (franchisee), in consideration of for a fee.

ii. The values violated by the fast food chain:
a) Using its power in the industry to win legal cases.
b) Violation of religious beliefs of people, which forbids the consumption of beef or beef products.
c) Encouraging unhealthy food habits among children by attracting them with discounted meals.
d) Damaging the perception of similar fast food restaurants in the eyes of the society.

i. Nitu Wears needs finance for short duration to meet the pending orders, hence it should tap the short term sources of finance for this purpose.

ii. The various short term sources of finance are described as under:

a. Trade Credit – Refers to the credit extended by one trader to another for the purchase of goods and services. It helps a trader to purchase goods without making immediate payment. It is generally granted for a period ranging between 3 to 6 months. This form of finance is a readily available. It does not create any charge on the assets of the purchasing company.

b. Banks – Banks extend short term loans to firms in different ways- cash credits, overdrafts, term loans, discounting of bills. Repayment of loans may be in lump sum or in installments. The borrower needs to provide some security to avail such loans. This source of fund can be available timely and is flexible, funds can be borrowed as and when needed in the required amount.

Secondary industries are concerned with using the material extracted at the primary stage to produce goods for final consumption or for further processing by other industrial units.

Secondary industries may be classified as:

i. Manufacturing industries: These industries convert raw materials or semi-finished products into finished products. It may be sub divided into:

a. Analytical industry: a basic raw material is analysed or separated into a number of products.

b. Synthetical industry: two or more materials are combined or mixed together to manufacture a new product.

c. Processing industry: It involves successive stages for manufacturing finished products. Example, sugar manufacturing.

d. Assembling industry: various parts or components are brought together to produce a finished product. Example, car assembling.

ii. Construction industries: these industries are engaged in construction of buildings, bridges, roads, dams, etc.

i. For raising funds from the public, Modern Ltd. has to issue the prospectus and undergo various formalities that are:
a. SEBI Approval: A public company is required to take prior approval from SEBI to raise funds from public.

b. Filing of prospectus: A prospectus has to be filed with the registrar.

c. Appointment of Bankers, Brokers, Underwriters: Bankers receive application money, brokers encourage public to apply for the shares. Underwriters are the persons who undertake to buy the shares, if these are not subscribed by the public.

d. Minimum subscription: a company must receive the amount of minimum subscription in cash within 120 days from the issue.

e. Application to stock exchange: Public company has to get its shares listed on a stock exchange within 10 weeks from the date of closure of subscription list.

ii. A public company sometimes decides not to raise funds from the public because it may be confident of obtaining the required capital privately. In this case it will have to file Statement in Lieu of prospectus that contains information much similar to that of a prospectus.

Despite limitations of size and resources, many people continue to prefer sole proprietorship over other forms of organisation due to the following reasons:
i. Formation and closure: It is very easy and simple to form a sole proprietorship form of business organisation. No legal formalities are required to be observed. Similarly, the business can be wound up any time if a proprietor so decides.
ii. Direct incentives: In sole proprietorship form of business organisation, the entire profit of the business goes to the owner. This motivates the proprietor to work hard and run the business efficiently.
iii. Prompt decision making: As the sole trader takes all the decisions himself, the decision making becomes quick, which enables the owner to take care of the available opportunities immediately and provide immediate solutions to the problems.
iv. Confidentiality of information: The business secrets are known only to a proprietor. He/she is not required to disclose any information to others unless and until he/she himself so decides. He/she is also not bound to publish his/her business accounts.
v. Better control: An owner has full control over his/her business. He/she plans, organises and co-ordinates the various activities. Since he/she has all the authority, there is always effective control.

i. The type of deposits made by Solar Ltd is Inter Corporate Deposits. The inter corporate deposits are unsecured short-term deposits made by a company with another company.
ii. Merits of Inter corporate deposits are:
a. Inter-corporate deposits maintain secrecy. The brokers never reveal their list of lenders and borrowers as they believe that if secrecy is not maintained the rate of interest can fall abruptly.
b. These deposits are usually used by borrowing company to solve problems of short-term funds insufficiency.
c. Transactions are free from bureaucratic and legal problems.

The limitations of inter-corporate deposits are:

a. These cannot be used for long term financing.

b. High risk is involved as ICD is an unsecured deposit.

c. The borrower company has to pay higher rates of interest than bank loans.

i. Albert and Anthony have formed the ‘Particular Partnership’. It is formed for a specified time period to accomplish a particular project, i.e. construction of a Mall.

ii. The partnerships they can form on the basis of liability are:

a. General Partnership: In this type of partnership, the liability of partners is limited and joint.

b. Limited Partnership: In limited partnership, the liability of at least one partner is unlimited where as other partners may have limited liability.

iii. Registration of Partnership, i.e. entering its name in the Registrar of Firms is a conclusive proof of the existence of the firm.

It is not compulsory to get partnership firm registered. However it is beneficial to get it registered as an unregistered firm suffers following consequences:

a. A partner of unregistered firm cannot file a suit against the firm or any other partner.

b. An unregistered firm cannot file a suit against any third party for recovery of claims.

c. An unregistered firm cannot file a suit against any partner.

A departmental store is a large establishment offering a wide variety of consumer products from low price items to very expensive goods under one roof.

Departmental stores offer various advantages such as:

a. Shopping convenience: A departmental makes the shopping easy because all types of goods are available under one roof. It saves time and labour.

b. Choice of products: It offers a large variety of products different designs, colour, and style. A customer can make a good selection of goods.

c. Services to customers: Departmental stores provide various types of services to customers. They extend liberal credit, accept telephone orders, and provide free delivery services. They provide facilities of rest rooms; play rooms post and telegraph office.

But the departmental stores have certain limitations too which are:

a. Lack of personal attention: Because of larger scale operations, it is very difficult to provide adequate personal attention to customers.

b. High operating cost: The operating costs are very high because they provide attractive services to the consumers.

c. High possibility of loss: Because of large scale operations and large scale of operations, the chances of losses are high.

i. The form of business organisaton being suggested by Zaruni Ltd. is a Joint Venture.
A joint venture is the pooling of resources and expertise by two or more businesses to achieve a particular goal that can be diversifying, moving into new markets, new products, etc. These organisations can be private, government-owned or any foreign company.

ii. The benefits of Joint ventures are:

a. Increased resources and capacity: Joint venture adds to the existing resources and capacity enabling the company to grow more quickly.

b. Access to new markets: When a business enters into Joint Venture, it can access new markets.

c. Innovation: It allows business to come up with new and innovative products.

d. Low cost of production: When an international corporation merges with an Indian company, they get immense benefit of lower cost of production and operations.